naturallight

Despite Dedicated ETFs, No Reliable Way to Play Natural Gas

>>>Yet, storage problems didn't stop Wall Street from having
>>>Gold and Silver ETFs. If Wall Street has products that hold
>>>gold and silver, why not natural gas?

I’m sorry if this sounds mean, but shouldn’t the Seeking Alpha contributors at least attempt some analysis?

Natural gas ETF’s have well over $4bn in AUM now. How much storage space would that require? How much storage space is available, and how much is currently being used? What is the current cost of storage, and would it be more expensive than the losses from the steep contango?

The answers to all of these questions are easily available through the Google.

Natural Gas Production Outlook: Decreases Are in the Offing

>>>1. It is the simplest way to seasonally adjust the data,
>>>which is important because there is considerable seasonal
>>>pattern in natural gas production (this seasonal pattern had
>>>been less pronounced lately, but it is still significant).


Umm, what? Natural gas production exhibits virtually NO seasonality. Here is U.S. Dry Natural Gas Production (bcf/d) by month since Jan-1997. The difference between the biggest month (March) and the smallest month (September) is only 4.4%. Furthermore, I’m fairly sure this is explained by the effects of large hurricanes, which is not really “seasonality”.

Jan 52.6
Feb 52.6
Mar 53.2
Apr 52.7
May 52.7
Jun 52.9
Jul 52.2
Aug 52.2
Sep 50.8
Oct 51.6
Nov 52.1
Dec 52.1

Now's the Time (Relatively) for Natural Gas

If oil and NG are not substitutes, why does the BTU for BTU comparison make any sense?

Investing in Natural Gas: It's Time

^^^ Are you kidding? Bush took a huge surplus and left with a huge deficit.

Read this for more:
freakonomics.blogs.nyt.../

How Low Can Natural Gas Prices Go?

The marginal mcf of production is certainly not hedged.


On Aug 27 06:39 PM dieuwer wrote:

> Producers have hedged at $7. They will get $7/mcf no matter what.
> Producers don't care what the spot price of NG is. They will supply
> NG until storage is full. After that, NG will be dumped on the street
> for $7.
>
> The most important question is: who has taken the opposite trade
> of the NG hedge? Who is loosing money each day being forced to buy
> NG at $7 (and sell for $3)?

Investing in Natural Gas: It's Time

This doesn’t make any sense. The author was specifically talking about total government debt. Therefore it’s logical to look at ALL taxes, not just personal income tax. Otherwise you are not comparing apples to apples.


On Aug 24 05:36 PM Smrt1 wrote:

> The reason why it is important to specifically discuss income tax
> rates is that it is the only tax specifically targeted at your production
> value to society and because most other taxes are all deducted versus
> income taxes therefore being zeroed out if you are looking at it
> from a mathematical standpoint. The lower 40% take advantage of numerous
> tax relief and renumeration programs most notably the Earned Income
> Tax Credit. Only very few taxes are not deductible such as alcohol,
> gasoline and utility taxes and utility companies nowadays actually
> offer reduced rates for low income taxpayers. The net of all of this
> is those in the lower half of the income brackets ie earning approx
> $32k annually have as a percentage of income, a tax rate of less
> than 1%. (Disclosure: I have a degree in Economics and certifications
> in Accouning and have worked in the Tax field.)

On Aug 24 03:19 PM naturallight wrote:

> >>>43% of all taxpayers owe no taxes, so it is left to the rest of
> us.
>
> Do you have any support for this? In 2003 the NYT showed that when
> you take into account ALL forms of taxation (not just personal income
> tax as lots of people do), the tax code is already pretty flat.<br/>
>
> graphics7.nytimes.com/...

UNG, GAZ: Bizarre Mismatch

I’ve read that UNG holds the front month futures and then rolls to the 2nd month, while GAZ holds the 2nd month and then rolls to the 3rd. I can’t find independent confirmation of whether that’s true, but if so, it might make arbitrage a little trickier.

Investing in Natural Gas: It's Time

>>>43% of all taxpayers owe no taxes, so it is left to the rest of us.

Do you have any support for this? In 2003 the NYT showed that when you take into account ALL forms of taxation (not just personal income tax as lots of people do), the tax code is already pretty flat.

graphics7.nytimes.com/...

Not All Commodity ETFs Are Created Equal

Wow, so all we have to do is look at a futures table to see where prices are going to go? Remarkable. Let’s keep this a secret.

Natural Gas: Grim Outlook Through Late 2010

Everyone talks about shale wells having steep decline rates. That is true, but the offshore GoM wells have decline rates that are nearly as steep, and offshore makes up roughly 12% of the total supply, while shale is still around 6-8%.

The overall decline rate for the U.S. is not really changing.

Natural Gas ETF Suspends New Shares: Are There Alternatives?

RE: the closed ended vs open ended, does anyone know if the NYMEX NG contracts are for physical delivery? Or just financial contracts (no delivery)? Or a mix of both?

Morningstar Misses Boat with Wide Moat ETFs

Umm, this is part of the Morningstar article

<i>However, we excluded it from this article because ELEMENTS licenses the Wide Moat Focus Index from Morningstar, Inc., and Morningstar does not make any representation regarding the advisability of investing in ETFs or ETNs that are based on Morningstar indexes. </i>

news.morningstar.com/a...

The Bullish Case for Natural Gas

>>>.....read the XTO and EOG and RRC and FST and CHK
>>>conference calls.. Those guys are some of the best in the
>>>business and I haven’t seen them this bullish in years.

FST and XTO are actually more hedged for gas now than the same point last year. (CHK, EOG, and RRC are indeed less hedged.)

Morgan Stanley put out a report today which shows that their 25-company E&P set is overall more hedged now than the same point last year (34% today vs 23% last year).

I’d be careful to put too much stock into what a select few players are saying.

Speculators Stabilize Oil Prices: Here's Proof

> I think you don't understand how a commodity ETF works.
> USO must buy/sell futures when the number of units increases/
> decreases; except for the roll, they cannot buy/sell futures under
> any other circumstance. The number of futures contracts typically
> *does not change* when USO's price swings, only when the
> number of units changes; therefore the price swings are irrelevant.
> The other side of the contract (I think you mean a swap?) is also irrelevant.

It is relevant considering that the huge performance discrepancy. Since the beginning of 2007, USO is -50.3% and the front month oil contract is -19.6%.

Furthermore, this doesn’t address my main point—why are you treating an investor purchase of 1 unit of USO at $110 the same as an investor purchase of 1 unit at $35? If you’re looking to measure the impact of investor fund flows on underlying commodity prices, this is clearly incorrect.

Speculators Stabilize Oil Prices: Here's Proof

> On Aug 03 09:05 PM naturallight wrote:
> Isn't this chart extremely misleading because you're using number
> of units for the red line? I think you should be using AUM or some
> sort of metric that encompasses how much in dollars these ETF investors
> are spending.

> On Aug 03 09:41 PM Rayden wrote:
> Number of units is the correct measure. It is actually a rough approximation to number of
> futures contracts. Consider what happens normally, the fund rolls over their front month
> futures to the same dollar value of next month futures, which is (ignoring roll yield for
> now) roughly the same number of contracts. New unit creation causes more futures to be
> bought, and unit redemption causes futures to be sold. So, aside from changes in the
> number of futures caused by the roll yield, the only thing that causes net futures buying or
> selling is unit creation or redemption. The changes in number of units have been very
> much greater than the effect of the roll yield, so I have essentially chosen to ignore the roll
> yield in this analysis. I feel that is a reasonable approximation.


This is ridiculous. Number of USO units is an extremely poor approximation to the numbers of futures contracts given the big swings in USO’s price. You really think that the bank on the other side of the futures contract looks only at the units and not the market value? That would be insane.